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How To Actually Avoid EU Tax With US LLC? (without changing residency)

S

szneka

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Aug 31, 2021
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#1
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Hi there!

Here's the deal:

- I'm a EU citizen (Poland) and I need to remain as such (can't really change my tax residency, family reasons)
- I do not currently live in my country of origin but within the EU (Polish government doesn't know)
- I sell coaching and consulting services in the US (legitimate)
- I've been using EMI's to collect payments but as I scale the business I need more reliable and legal ways to manage money. Currently at $7-10k/mo - about to scale to $20-40k/mo
- I haven't really declared my income in Poland yet as I've been using non CRS EMI's - but I'm looking to quit that or find a safer way

Here are the choices I've been thinking about for tax optimization:

1: Use a person from Turkey to start a Delaware LLC and funnel the LLC's income to an account in North Cyprus or Turkey (since Turkey and USA do not have the CRS agreement yet) - > Use that account for personal spending in the EU

or

2: Wyoming/Delaware LLC - > Brex Business Account - > Buy Tax Deductible Crypto (so that business is legitimized in Poland via form 5472, but has no declarable profits) - > Monero - > Non-KYC Exchange - > Bank Account In Macedonia/Georgia/Serbia (personal use)

I want to use an American LLC because of the trust it builds with my potential clients - but I need a way to actually legally use that money.

So, are there any other safe choices to use the US LLC revenue for personal spending while living in Europe without Polish irs trying to tax it?

Thank you!

P.S. The business and income is legitimate. However, I swore not to pay the corrupt government a penny after my father was scammed by the local irs for hundreds of thousands (illegitimately) by the government bullies here. That being said, I cannot change my personal tax residency at the moment.
 
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#3
Wait, what, you don't live in Poland, but you are hiding that from the Polish authorities?
The US doesn't use CRS and probably never will, they use FATCA for that. I believe the reporting for US accounts is quite limited anyway.
If you search on the forum, I'm sure you'll find lots of options to avoid the reporting, but if I were you, I would try to find a legal solution.
 
#4
Not necessarily hiding but it'd be near impossible to renounce Polish tax residency in my situation. I own some properties there and I have a loan in a Polish bank - that's enough for the local irs to never allow me to renounce the tax residency - even if I spend 365 days a year outside of the borders (and to be fair - nobody can track my movement within Shengen anyway, so I'm free to live in another EU country). I don't deal with anything shady at all so I'm not worried.

So it seems like I have two options:

1: Keep the money in the US bank account and just not declare it (probably not the smartest idea)

2: Declare the income from my US based LLC in Poland but "tax-optimize" it by creating another company in Serbia/Montenegro/Georgia and invoice the US LLC for all the profits with high-fee services - and then funnel out the profits for personal use in a Serbian bank. That way my US LLC's "income" is legalized and it doesn't end in the hands of the corrupt polish government.

Would that work?
 
#5
"Declaring" the US LLC to Polish tax authorities will mean it's tax resident in Poland. At that point it's trivial for Polish tax authorities to audit the company and see you've been shifting the profits to an undeclared corp in Serbia or some other country.

What I would do is keep the money in the US account and pay out ("distribute") the profits to a non-CRS personal account as needed. You could also buy crypto and sell it via localbitcoins or localmonero within Schengen.
 
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#6
I know it's not what you're looking for, but you'd be better off paying the taxes you have to pay, you'll sleep well, everything will be legal and you'll still be making a good amount of money.

If you start avoiding taxes you may end up with a lot of troubles and even having your assets seized, get fined, get charges, etc. Better have the 70% of something than the 100% of nothing.

Also, regarding your proposed structure, it won't work as you're selling your products to US people and you'll probably be considered ETOB ("you are engaged in “considerable, continuous, and regular” business in the US") and you'll have to pay US taxes.
 
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#7
szneka said:
Not necessarily hiding but it'd be near impossible to renounce Polish tax residency in my situation. I own some properties there and I have a loan in a Polish bank - that's enough for the local irs to never allow me to renounce the tax residency - even if I spend 365 days a year outside of the borders (and to be fair - nobody can track my movement within Shengen anyway, so I'm free to live in another EU country).
Click to expand...

I call bulls**t. All EU states have signed tax treaties with each other and those set out specific rules for tax residency. Your properties would still be taxable in Poland, but that doesn't have anything to do with your tax residency. If you spend 183+ days in another country, that's where your tax residency will be. I'd suggest you speak to an accountant.

legrant said:
Also, regarding your proposed structure, it won't work as you're selling your products to US people and you'll probably be considered ETOB ("you are engaged in “considerable, continuous, and regular” business in the US") and you'll have to pay US taxes.
Click to expand...

OP should ask a CPA, but I strongly doubt that. You're not ETBUS just because you sell to US customers.
 
#8
#9
I got my answer from marzio - I think we can close the thread safely. I'd be delighted to pay just 5% tax and sleep well.

P.S. You do not have to pay taxes in the US if you own an U.S. LLC and run it from EU, even if you sell only to U.S. based customers. It's a pass-through entity. Meaning you pay taxes where your tax residency is. And changing the tax residency to try to avoid it without significant lifestyle changes is a major P.I.T.A.
 
#12
szneka said:
P.S. You do not have to pay taxes in the US if you own an U.S. LLC and run it from EU, even if you sell only to U.S. based customers.
Click to expand...

It's not quite so simple. Similar to what other countries define as "permanent establishment", there can be ETBUS in the US.
So if you have employees in the US (dependent agents), that would trigger US taxes. There also be an issue if you have a warehouse in the US. You should discuss the details with a CPA.
If you only do dropshipping from China and have no employees in the US, then it should probably be fine, but I'm not a lawyer.
 
#13
JustAnotherNomad said:
I call bulls**t. All EU states have signed tax treaties with each other and those set out specific rules for tax residency. Your properties would still be taxable in Poland, but that doesn't have anything to do with your tax residency. If you spend 183+ days in another country, that's where your tax residency will be. I'd suggest you speak to an accountant.



OP should ask a CPA, but I strongly doubt that. You're not ETBUS just because you sell to US customers.
Click to expand...
"you are engaged in “considerable, continuous, and regular” business in the US". According to what he said, all his business is in the US
 
#15
JustAnotherNomad said:
No. There is a legal definition to those terms, they're not random words open to your interpretation.
Click to expand...
If took the line from a website that offers tax services related to what we're talking about, if you want to argue about their interpretation, you're free to send them an email. Here's their website "US LLC Taxes for non-US and US entrepeneurs • Online Taxman"

And now, from my own point of view, I highly doubt you're able to sell products/services to JUST US customers (as stated by OP), using a US LLC, and not be taxed at all in the US. If it was a mix of mostly non-US people and some US people buying the products/services it'd be understandable, but OP said he sells to US customers and that's it.
 
#16
You should read both what I wrote and what is written on the website you linked to.

I wrote:
"There [could] also be an issue if you have a warehouse in the US. You should discuss the details with a CPA.
If you only do dropshipping from China and have no employees in the US, then it should probably be fine, but I'm not a lawyer."

The website you linked to says:
"[...] the tax treaty may circumvent the US rights to tax you. In general, not taxable are:
Personal services performed from abroad
Selling digital products
Web design etc.
Selling physical products if the shipping point is from outside of the US."

It also goes on to state: "To date, we are not aware of any court ruling against this interpretation of the tax code [that Amazon FBA is not taxed in the US]. However, as with any aggressive approach to tax planning, there is always the possibility that the IRS eventually rejects it."

So not even they have heard of cases where people have had to pay US taxes in such cases. And that is with people using Amazon FBA (note I mentioned the warehouse above).
But OP is only talking about coaching and consulting services.
Nowhere in that article you linked to is it mentioned that by only selling to US customers, you are doing business in the US. Quite the contrary, it explicitly states that personal services performed from abroad are exempt from US taxes.

Even the IRS explains that such income is taxed where the services are performed, not where the customer is located:
https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-source-of-income
 
#17
JustAnotherNomad said:
You should read both what I wrote and what is written on the website you linked to.

I wrote:
"There [could] also be an issue if you have a warehouse in the US. You should discuss the details with a CPA.
If you only do dropshipping from China and have no employees in the US, then it should probably be fine, but I'm not a lawyer."

The website you linked to says:
"[...] the tax treaty may circumvent the US rights to tax you. In general, not taxable are:
Personal services performed from abroad
Selling digital products
Web design etc.
Selling physical products if the shipping point is from outside of the US."

It also goes on to state: "To date, we are not aware of any court ruling against this interpretation of the tax code [that Amazon FBA is not taxed in the US]. However, as with any aggressive approach to tax planning, there is always the possibility that the IRS eventually rejects it."

So not even they have heard of cases where people have had to pay US taxes in such cases. And that is with people using Amazon FBA (note I mentioned the warehouse above).
But OP is only talking about coaching and consulting services.
Nowhere in that article you linked to is it mentioned that by only selling to US customers, you are doing business in the US. Quite the contrary, it explicitly states that personal services performed from abroad are exempt from US taxes.

Even the IRS explains that such income is taxed where the services are performed, not where the customer is located:
https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-source-of-income
Click to expand...
Whatever floats your boat buddy.

Both options he suggested will eventually cause him trouble as he's avoiding taxes. My opinion is on my first reply, I don't care about anything else or about who's misinterpreting information.
 
#18
Yes, I agree, his options will cause him trouble.
My suggestion is for him to fix his tax residency. He's worried about Poland, but I'm quite confident he's not a Polish tax resident anymore.
 
#19
JustAnotherNomad said:
Yes, I agree, his options will cause him trouble.
My suggestion is for him to fix his tax residency. He's worried about Poland, but I'm quite confident he's not a Polish tax resident anymore.
Click to expand...
Sorry for my rudeness in the previous reply, not having a good day. But yes, he should first fix his tax residency issues and then find a way to make everything legal because avoiding taxes may work in the short term, but the problems that may appear in the future could destroy everything he's accomplished.
 
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#20
JustAnotherNomad said:
You should read both what I wrote and what is written on the website you linked to.

I wrote:
"There [could] also be an issue if you have a warehouse in the US. You should discuss the details with a CPA.
If you only do dropshipping from China and have no employees in the US, then it should probably be fine, but I'm not a lawyer."

The website you linked to says:
"[...] the tax treaty may circumvent the US rights to tax you. In general, not taxable are:
Personal services performed from abroad
Selling digital products
Web design etc.
Selling physical products if the shipping point is from outside of the US."

It also goes on to state: "To date, we are not aware of any court ruling against this interpretation of the tax code [that Amazon FBA is not taxed in the US]. However, as with any aggressive approach to tax planning, there is always the possibility that the IRS eventually rejects it."

So not even they have heard of cases where people have had to pay US taxes in such cases. And that is with people using Amazon FBA (note I mentioned the warehouse above).
But OP is only talking about coaching and consulting services.
Nowhere in that article you linked to is it mentioned that by only selling to US customers, you are doing business in the US. Quite the contrary, it explicitly states that personal services performed from abroad are exempt from US taxes.

Even the IRS explains that such income is taxed where the services are performed, not where the customer is located:
https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-source-of-income
Click to expand...
This interpretation is correct. Income earned in the US is taxable for solo member LLCs with foreign owner
 
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